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Wednesday, October 25, 2017

Why Samsung and LG dominate Korea's smartphone market

A short but very interesting article in The Korea Herald helps to answer the question of why Samsung and LG are so dominant in the local smartphone market here in Korea. Entitled "Foreign makers keep eye on changes in smartphone distribution" the article begins by noting that foreign smartphone manufacturers are paying attention to lawmakers' efforts to reform smartphone distribution channels. "Currently, the Korean smartphone market is dominated by two local firms -- Samsung Electronics with a 63.8 percent share and LG Electronics with 11.8 percent. Apple holds an 11.9 percent share."
The article goes on to note that "The solid presence of Korean firms is partly driven by the nation’s unique distribution channels in which local telecom carriers entice customers by giving subsidies for Samsung and LG phones, based on prior arrangements between the carriers and handset makers. They provide less subsidies for Apple phones, as they have no prior arrangement with Apple, and provide none to other Chinese and Japanese brands because their phones are not sold via mobile carriers but through their own stores or online."
Furthermore, " In Korea, only 8 percent of smartphone owners bought devices without going through telecom operators compared to the global average of 61 percent, according to the US research firm Strategy Analytics."
It would appear that the days of such overwhelming dominance by Samsung and LG are about to end. Smartphones themselves are modular in nature and quickly become commoditized. These trends suggest that Korea's leading companies, while not abandoning the design and manufacture of smart phones, need to move toward the software and services that these devices carry.